Inflation in the eurozone is likely to have risen further in May. In the data surprises on the upside, the EUR/USD could extend its advance, economists at Commerzbank report.

Setback in EUR/USD is quite possible if data surprises on the downside

“There is speculation amongst market participants about a larger rate step in July. If today’s inflation data were to surprise on the upside speculation of this nature is likely to be fuelled further. This might benefit EUR and allow it to extend its gains against USD.”

“If the data surprises on the downside a setback in EUR/USD is quite possible. With a view to the ECB meeting next Thursday a possible downside correction in EUR/USD is likely to be limited though.”

“Following all the hawkish comments over the past weeks it cannot be excluded that the ECB will sound hawkish at its meeting again. As a result, we urge caution ahead of the meeting.”